Risk And Concurrent Engineering

To illustrate why these problems occur, consider a situation where the sales and marketing force promises the marketplace a new product with advanced technology that hasn't yet been developed. To compress the schedule, the product development team begins designing the product without knowing whether or not (and when) the technology can be developed. Production teams are asked to develop manufacturing plans without having any drawings. This results in massive changes when the product final reaches production.

There are three questions that need to be continuously addressed:

• Can the new technology be developed?

• Can we demonstrate the new technology within the product?

• Can the product then be manufactured within the time, cost, and performance (i.e., reliability) constraints?

Simultaneous development of technologies and products has become commonplace. To decrease the risks of rework, there should be a demonstration that the technology can work as expected. Leading firms that use concurrent engineering do not include a new technology in a product until the technology reaches a prescribed level of maturity. They have disciplined processes that match requirements with technological capability before product development is launched. These companies have learned the hard lesson of not committing to new products that outstrip their technological know-how. These practices stem from their recognition that resolving technology problems after product development begins can result in a tenfold cost increase; resolving these problems in production could increase costs by a hundredfold.

Some commonly accepted practices to reduce risks include:

• Flexibility in both the resources provided and the product's performance requirements to allow for uncertainties of technical progress

• Disciplined paths for technology to be included in products, with strong gatekeepers to decide when to allow it into a product development program

• High standards for judging the maturity of the technology

• The imposition of strict product development cycle times

• Rules concerning how much innovation can be accepted on a product before the next generation must be launched (these rules are sometimes referred to as technology readiness levels)

Collectively, these factors create a healthy environment for developing technology and making good decisions on what to include in a product.

Overlapping activities can be very risky if problems are discovered late in the cycle. One common mistake is to begin manufacturing before a sufficient quantity of engineering drawings is available for review. This normally is the responsibility of systems integration personnel. Systems integration should conclude with a critical design review of engineering drawings and confirmation that the system's design will meet requirements—a key knowledge point. It should also result in firm cost and schedule targets and a final set of requirements for the current version of the product. Decision-makers should insist on a mature design, supported with complete engineering drawings, before proceeding to even limited production. Having such knowledge at this point greatly contributes to product success and decreases costly rework.

As an example, Boeing had released over 90 percent of the engineering drawings on its 777-200 airplane halfway through its product development program. This allowed Boeing to have near certainty that the design for the 777-200 airplane would meet requirements. On the other hand, a different program had released only about half of its engineering drawings at approximately the same point in development. The other program encountered numerous technical problems in testing that resulted in redesigns, cost increases, and schedule delays.

Companies intent on decreasing the risks of concurrent engineering have found ways to employ testing in a manner that avoids late-cycle churns, yet enables them to efficiently yield products in less time, with higher performance, and at a lower cost. Generally, these practices are prompted by problems—and late-cycle churn—encountered on earlier products. Both Boeing and Intel were hurt by new products in which testing found significant problems late in development or in production that may have been preventable. Boeing absorbed cost increases in one line of aircraft and delivered it late to the first customer; Intel had to replace more than a million microprocessors that contained a minor, but nevertheless well-publicized, flaw. On subsequent products, these firms were able to reduce such problems by changing their approach to testing and evaluation and were able to deliver more sophisticated products on time, within budget, and with high quality.

Boeing encountered significant difficulties late in the development of its 747-400 airliner, which delayed its delivery to the customer and increased costs. When the 747-400 was delivered to United Airlines in 1990, Boeing had to assign 300 engineers to solve problems that testing had not revealed earlier. The resulting delivery delays and initial service problems irritated the customer and embarrassed Boeing. Boeing officials stated that this experience prompted the company to alter its test approach on subsequent aircraft, culminating with the 777-200 program of the mid-1990s. According to company officials, the 777-200 testing was the most extensive conducted on any Boeing commercial aircraft. As a result, Boeing delivered a Federal Aviation Administration-certified, service-ready 777-200 aircraft at initial delivery and reduced change, error, and rework by more than 60 percent.

A hallmark of the 777-200's success was the extended-range twin-engine certification for transoceanic flight it received from the Federal Aviation Administration on the first aircraft. This certification is significant because it normally takes about two years of actual operational service before the Federal Aviation Administration grants extended range certification. In the case of the 777-200, the testing and evaluation effort provided enough confidence in the aircraft's performance to forego the operational service requirements.

Intel has also employed testing to reduce late-cycle churn on its new microprocessors. According to Intel officials, the company learned this lesson the hard way—by inadvertently releasing the initial Pentium® microprocessor with a defect. After the release, Intel discovered a flaw in one of the Pentium® microprocessor's higher level mathematical functions. Using analytical techniques, Intel concluded that this flaw would not significantly affect the general public because it would occur only very rarely. Intel, however, miscalculated the effect on the consumer and was forced to replace more than a million microprocessors at a cost of about $500 million. Intel underwent a significant corporate change in its test approach to ensure that bugs like this did not "escape" to the public again. As a result, the performance of subsequent microprocessors, like the Pentium® Pro and Pentium® III microprocessors, has significantly improved. Despite adopting a much more rigorous testing and evaluation approach, Intel did not increase the amount of time it took to develop new, more sophisticated microprocessors. In fact, Intel's rate of product release increased over time.8

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